Any person may, with the leave of the Commissioner, adopt an accounting period being the 12 months ending on some date other than 30 June. For the purposes of this Act, the person's accounting period in each succeeding year shall end on the corresponding date of that year, unless:

If a partnership becomes, or ceases to be, a VCLP, an ESVCLP, an AFOF or a VCMP on a particular day:

(a)
the accounting period during which that day occurs (the
first accounting period
) is taken to have ended immediately before that day; and

(b)
another accounting period is taken to have commenced at the beginning of that day.

The other accounting period ends on the day on which the first accounting period would have ended if this section did not apply.

Example:

A partnership whose accounting periods ended on 30 June becomes a VCLP on 1 October 2002, and ceases to be a VCLP on 1 April 2003.

The effect of becoming a VCLP:
the accounting period that commenced on 1 July 2002 is taken under this section to end on 30 September 2002, and a second accounting period commences on 1 October 2002. The second accounting period is scheduled to end on 30 June 2003.

The effect of ceasing to be a VCLP:
the second accounting period is now taken under this section to end on 31 March2003, and a third accounting period commences on 1 April 2003. The third accounting period is to end on 30 June 2003.

S 20 repealed by No 133 of 2003, which contains the following transitional provision:

Transitional
-
sections 20, 102AAX and 391 of the
Income Tax Assessment Act 1936and sections 103-20 and 376-60 of the
Income Tax Assessment Act 199778(1)
Despite the repeals of sections 20, 102AAX and 391 of the
Income Tax Assessment Act 1936
and sections 103-20 and 376-60 of the
Income Tax Assessment Act 1997
, those sections continue to apply, in relation to a transaction, event or thing:

(a)
that involves an amount in a foreign currency; and

(b)
to which section 960-50 of the
Income Tax Assessment Act 1997
does not apply;

as if those repeals had not happened.

78(2)
Despite the following amendments:

(a)
the amendment of section 102AAW of the
Income Tax Assessment Act 1936
;

(b)
the amendment of section 389 of the
Income Tax Assessment Act 1936
;

sections 102AAW and 389 of the
Income Tax Assessment Act 1936
continue to apply, in relation to the former section 20 of the
Income Tax Assessment Act 1936
, as if those amendments had not been made.

S 20 formerly read:

INCOME ETC, TO BE EXPRESSED IN AUSTRALIAN CURRENCY
20(1)
For all the purposes of this Act, income wherever derived and any expenses wherever incurred shall be expressed in terms of Australian currency.
20(2)
Where an amount of income of a taxpayer is derived during the whole or part of a year of income from the carrying on of a business in a foreign country:

(a)
that amount of income shall be expressed in Australian currency at a rate equal to the average of the exchange rates applicable from time to time during the whole or that part of that year; and

(b)
any amount of foreign tax paid in respect of that foreign income shall be expressed in Australian currency at the exchange rate applicable at the time when the tax is paid.

20(3)
Where an amount of foreign income of a taxpayer is derived during a year of income (not being income to which subsection (2) or (4) applies), that amount of foreign income, and any amount of foreign tax paid in respect of that foreign income, shall be expressed in Australian currency at the exchange rate applicable
-

(a)
where the whole amount of that income is remitted to Australia in that year
-
on the day on which it is remitted;

(b)
where part of the amount of that income is remitted to Australia in that year
-
on the day on which it is remitted; or

21A(1)
For the purposes of this Act, in determining the income derived by a taxpayer, a non-cash business benefit that is not convertible to cash shall be treated as if it were convertible to cash.

21A(2)
For the purposes of this Act, if a non-cash business benefit (whether or not convertible to cash) is income derived by a taxpayer:

(a)
the benefit shall be brought into account at its arm
'
s length value reduced by the recipient
'
s contribution (if any); and

(b)
if the benefit is not convertible to cash
-
in determining the arm
'
s length value of the benefit, any conditions that would prevent or restrict the conversion of the benefit to cash shall be disregarded.

21A(3)
Where:

(a)
a non-cash business benefit is income derived by a taxpayer in a year of income; and

(b)
if the taxpayer had, at the time the benefit was provided, incurred and paid unreimbursed expenditure in respect of the provision of the benefit equal to the amount of the arm
'
s length value of the benefit
-
a once-only deduction would, or would but for section
82A
, and Subdivisions F, GA and G of Division
3
of this
Part
, of this Act, and Divisions
28
and
900
of the
Income Tax Assessment Act 1997
, have been allowable to the taxpayer in respect of a percentage (in this subsection called the
deductible percentage
) of the expenditure;

(a)
a non-cash business benefit is income derived by a taxpayer in a year of income; and

(b)
a percentage (in this subsection called the
non-deductible entertainment percentage
) of any expenditure incurred by the provider in respect of the provision of the benefit is non-deductible entertainment expenditure;

the amount that, apart from this subsection, would be applicable under subsection (2) in respect of the benefit shall be reduced by the non-deductible entertainment percentage.

arm
'
s length value, in relation to a non-cash business benefit, means:

(a)
the amount that the recipient could reasonably be expected to have been required to pay to obtain the benefit from the provider under a transaction where the parties to the transaction are dealing with each other at arm
'
s length in relation to the transaction; or

(b)
if such an amount cannot be practically determined
-
such amount as the Commissioner considers reasonable.

income derived by a taxpayermeans income derived by a taxpayer in carrying on a business for the purpose of gaining or producing assessable income.

non-cash business benefitmeans property or services provided after 31 August 1988:

(a)
wholly or partly in respect of a business relationship; or

(b)
wholly or partly for or in relation directly or indirectly to a business relationship.

non-deductible entertainment expendituremeans expenditure to the extent to which:

(a)
section
32-5
of the
Income Tax Assessment Act 1997
applies to the expenditure; and

(b)
but for that section, the expenditure would be deductible under section
8-1
of the
Income Tax Assessment Act 1997
.

once-only deduction, in relation to expenditure, means a deduction in a year of income in respect of a percentage of the expenditure where no deduction is allowable in respect of a percentage of the expenditure in any other year of income.

provide:

(a)
in relation to property
-
includes dispose of (whether by assignment, declaration of trust or otherwise); and

(b)
in relation to services
-
includes allow, confer, give, grant or perform.

recipient
'
s contribution, in relation to a non-cash business benefit, means the amount of any consideration paid to the provider by the recipient in respect of the provision of the benefit, reduced by the amount of any reimbursement paid to the recipient in respect of that consideration.

servicesincludes any benefit, right (including a right in relation to, and an interest in, real or personal property), privilege or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under:

(a)
an arrangement for or in relation to:

(i)
the performance of work (including work of a professional nature), whether with or without the provision of property;

(ii)
the provision of, or of the use of facilities for, entertainment, recreation or instruction; or

(iii)
the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction;

(b)
a contract of insurance; or

(c)
an arrangement for or in relation to the lending of money.

21A(6)
Notwithstanding section
21
, the consideration referred to in the definition of
recipient
'
s contribution
in subsection (5) of this section is consideration in money.

Archived:

S 22 to 23AAA repealed as inoperative by
No 101 of 2006
, s 3 and Sch 1 item 40, effective 14 September 2006. For
application and savings provisions
and for former wording see the
CCH Australian Income Tax Legislation archive
.

Note:

Remade versions of parts of section 23, which is repealed by the above item, are included in the
Income Tax Assessment Act 1997
by Schedule 2 to this Act. The provisions concerned (and the remade sections) are: subparagraphs 23(a)(ii) and (vi) (section
768-100
); paragraph 23(b), subparagraphs 23(c)(iii) to (v) and paragraphs 23(u), (v) and (ya) (section
842-105
); and paragraphs 23(kc) and (kca) (section
768-105
). Paragraph 23(jb) has also been remade by Schedule 2 as paragraph
128B(3)(jb)
of the
Income Tax Assessment Act 1936
.

SECTION 23AA
INCOME OF PERSONS CONNECTED WITH CERTAIN PROJECTS OF UNITED STATES GOVERNMENT

approved projectmeans the establishment, maintenance or operation of the North West Cape naval communication station, of the Joint Defence Space Research Facility, of the Sparta project, of the Joint Defence Space Communications Station or of a Force Posture Initiative.

Definition of
"
approved project
"
amended by No 133 of 2014, s 3 and Sch 3 item 1, by substituting
"
, of the Joint Defence Space Communications Station or of a Force Posture Initiative
"
for
"
or of the Joint Defence Space Communications Station
"
, applicable in relation to assessments for the 2014-15 income year and later income years.

Definition of
"
approved project
"
amended by No 93 of 1971; inserted by No 38 of 1967.

Definition of
"
Australia
"
repealed by No 2 of 2015, s 3 and Sch 4 item 12, applicable to an income year, a year of income or a tax period that commences on or after 1 July 2015. The definition formerly read:

Australiaincludes the Territories.

civilian accompanying the United States Forcesmeans a person (not being a member of the United States Forces, an Australian citizen or a person ordinarily resident in Australia) who:

(a)
is an employee:

(i)
of the United States Forces; or

(ii)
of, or of a body conducting, a club or other facility established for the benefit or welfare of members of the United States Forces or of persons accompanying those Forces and which is recognized by the Government of the United States of America as a non-appropriated fund activity; or

(b)
is serving with an organization that, with the approval of the Government of the Commonwealth, accompanies the United States Forces in Australia;

dependant, in relation to a person, means:

(a)
the spouse of that person; or

(b)
a relative, other than the spouse, of that person who is wholly or mainly dependent for support on that person;

but, in the case of a person who, immediately before becoming such a spouse or relative, was ordinarily resident in Australia, does not include that person so long as that person continues to be ordinarily resident in Australia.

Force Posture Agreementmeans the Force Posture Agreement between the Government of Australia and the Government of the United States of America done at Sydney on 12 August 2014, as amended and in force for Australia from time to time.

Note:

The Treaty could in 2014 be viewed in the Australian Treaties Library on the AustLII website (http://www.austlii.edu.au).

Definition of
"
prescribed contract
"
amended by No 108 of 1981 and No 38 of 1967.

prescribed purposesmeans:

(a)
in relation to a foreign contractor or foreign employee
-
purposes relating to the performance of a prescribed contract;

(aa)
in relation to a United States employee
-
purposes relating to an approved project; and

(b)
in relation to a member of the United States Forces or a civilian accompanying the United States Forces
-
purposes relating to the carrying on of activities agreed upon between the Government of the Commonwealth and the Government of the United States of America.

the Joint Defence Space Communications Stationmeans the undertaking the establishment of which is provided for by an agreement dated 10 November 1969 between the Government of the Commonwealth and the Government of the United States of America.

Definition of
"
the Joint Defence Space Communications Station
"
amended by No 108 of 1981; inserted by No 93 of 1971.

the Joint Defence Space Research Facilitymeans the undertaking the establishment of which is provided for by an agreement dated 9 December 1966 between the Government of the Commonwealth and the Government of the United States of America.

Definition of
"
the Joint Defence Space Research Facility
"
amended by No 108 of 1981 and No 38 of 1967.

the North West Cape naval communication stationmeans the naval communication station the establishment of which is provided for by the agreement approved by the
United States Naval Communication Station Agreement Act 1963
.

the Sparta projectmeans the undertaking the establishment of which is provided for by a memorandum of arrangement dated 30 March 1966 between the Government of the Commonwealth, the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the United States of America.

For the purposes of this section, a foreign contractor, foreign employee or United States employee who is in Australia, or is carrying on business in Australia, solely for prescribed purposes does not cease to be in Australia solely for those purposes, or to be carrying on business in Australia solely for those purposes, by reason of anything undertaken or done by him or her in connexion with an undertaking in Australia of the Government of the United States of America, other than an approved project, agreed upon between the Government of the Commonwealth and the Government of the United States of America.

(b)
has been in Australia solely for prescribed purposes during a period when the person was a member of the United States Forces, a civilian accompanying the United States Forces or a United States employee; or

that person shall, for the purposes of the provisions of this Act other than Subdivision A of Division 17, be deemed not to have been a resident of Australia during that period, and the presence of that person in Australia during that period shall be disregarded in determining, for the purposes of those provisions, whether the person was a resident of Australia at any other time.

Subsection (3) does not apply in respect of, or of a part of, a period when a person was, or was a dependant of, a foreign contractor, a foreign employee, a civilian accompanying the United States Forces or a United States employee if the person:

(a)
being a company
-
was not a domestic corporation for the purposes of the law of the United States of America relating to income tax; or

(b)
not being a company
-
was not a resident of the United States of America for the purposes of that law or a citizen of the United States of America;

(a)
a person has derived income in respect of service as a civilian accompanying the United States Forces or as a United States employee during a period when the person was in Australia solely for prescribed purposes; and

prescribed taxpayermeans a taxpayer who, being a resident of Australia, is, or is included in a class of persons that is, prescribed by the regulations for the purposes of this section.

tax deductions unapplied, in relation to a deceased person, means any amounts withheld under Part 2-5 in Schedule 1 to the
Taxation Administration Act 1953
from work and income support related withholding payments and benefits derived by the deceased person in respect of United Nations service:

(a)
that have not been credited in payment of income tax; and

(b)
in respect of which a payment has not been made by the Commissioner.

United Nations servicemeans service, other than service as a member of the Defence Force, performed, at the direction or with the approval of the Commonwealth, outside Australia with an armed force under the control of the United Nations, at a time when the person performing the service was a prescribed taxpayer.

Archived:

Definition of
"
tax deductions unapplied
"
and
"
work and income support related withholding payments and benefits
"
substituted by
No 101 of 2006
, s 3 and Sch 1 item 41 and Sch 2 item 156, effective 14 September 2006. For
application and savings provisions
and for former wording see the
CCH Australian Income Tax Legislation archive
.

The regulations may prescribe a person or a class of persons for the purposes of this section but shall not so prescribe a person or class of persons unless the salary, wages and allowances received by the person or by all the persons in that class, as the case may be, in respect of his, her or their United Nations service are paid, given or granted by the Commonwealth or by the United Nations for and on behalf of the Commonwealth.

23AB(3)
A succeeding provision of this section does not apply in relation to a person if the regulations provide that that provision does not apply in relation to that person or in relation to a class of persons in which that person is included.

Regulations made for the purposes of subsection (2) or (3) may provide that the regulations shall be deemed to have taken effect on a date specified in the regulations, being a date before the date on which the regulations are notified in the
Gazette,
and, in that case, the regulations shall be deemed to have taken effect on the date so specified.

(c)
if the taxpayer had, at the time of the happening of the occurrence, been a member of the Defence Force rendering continuous full-time service outside Australia while the taxpayer was allotted for duty in an operational area described in item 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 or 14 of Column 1 of Schedule 2 to the
Veterans
'
Entitlements Act 1986,
the Commonwealth would be liable to pay a pension under that Act in respect of the incapacity, impairment or death of the taxpayer;

For the purposes of section 15-2 of the
Income Tax Assessment Act 1997
, the total value of all allowances, gratuities, compensations, benefits, bonuses and premiums (in this subsection referred to as
"
living allowances
"
) allowed, given or granted in meals, sustenance or the use of premises or quarters (including payment in lieu of one or more of those living allowances) to a taxpayer in respect of, or for or in relation directly or indirectly to, United Nations service shall be deemed to be an amount calculated at the rate of $2 for each week of that service in which any of those living allowances were so allowed, given or granted, or in which payment in lieu of any of those living allowances was made, to the taxpayer.

Subject to subsections (8), (8A) and (9A) and subsection
79B(4)
, a taxpayer is entitled to a rebate of tax in his or her assessment in respect of income of a year of income in which he or she has performed United Nations service and derived income by way of salary, wages or other allowances in respect of that service. The amount of the rebate is:

(a)
where the total period of that service performed by the taxpayer during the year of income is more than one-half of the year of income or where the taxpayer dies while performing that service during the year of income
-
an amount equal to the sum of:

(b)
in any other case
-
such amount as, in the opinion of the Commissioner, is reasonable in the circumstances, being an amount not greater than the amount of the rebate to which the taxpayer would have been entitled under this subsection if paragraph (a) had applied to him or her in respect of the year of income.

Archived:

S 23AB(7)(a)(ii)(A) repealed as inoperative by
No 101 of 2006
, s 3 and Sch 1 item 43, effective 14 September 2006. For
application and savings provisions
and for former wording see the
CCH Australian Income Tax Legislation archive
.

S 23AB(7) amended by No 70 of 2015, s 3 and Sch 2 items 1 and 2, by substituting para (a)(ii) for para (a)(ii) and (iii), and repealing notes 1 and 2, applicable in relation to assessments for the 2014-15 income year and later income years. Para (a)(ii) and (iii) and the notes formerly read:

(ii)
an amount equal to 50% of the sum of the following rebates (if any) in respect of the year of income:

(A)
(Repealed by
No 101 of 2006
)

(AA)
any rebate to which the taxpayer would be entitled under section
159L
, apart from section
159LA
;

(B)
any rebate to which the taxpayer is entitled under section
159J
in respect of a dependant who is an invalid relative for the purposes of class 5 in the table in subsection
159J(2)
or a dependant included in class 6 in the table in subsection
159J(2)
;

(BA)
any rebate to which the taxpayer would be entitled under section
159J
in respect of a dependant included in class 2 in the table in subsection
159J(2)
, apart from section
159JA
;

(C)
any rebate to which the taxpayer would, disregarding subsection
159J(1A)
, be entitled under section
159J
in respect of a dependant included in class 3 or 4 in the table in subsection
159J(2)
;

(D)
any rebate to which the taxpayer would be entitled under section
159J
in respect of a dependant included in class 1 in the table in subsection
159J(2)
if the assumptions in subsection (7A) of this section were made; and

(iii)
if the taxpayer was not entitled to a rebate under section
159J
in respect of a dependant included in class 1 in the table in subsection
159J(2)
or an invalid spouse or carer spouse for the purposes of class 5 in the table in subsection
159J(2)
-
an amount equal to any rebate to which the taxpayer would be entitled under that section in respect of a dependant included in class 1 in the table if it were assumed that subsection
159J(1C)
did not apply;

Note 1:

Paragraph 23AB(7)(a) lets a taxpayer include the dependent spouse rebate (without child), the child-housekeeper rebate or the housekeeper rebate for the purpose of working out the amount of rebate under this section, even if the taxpayer or the taxpayer
'
s spouse is eligible for family tax benefit at the Part B rate for the whole or part of a year.

Note 2:

Another effectof that paragraph (see sub-subparagraph (D)) is to let a taxpayer include the dependent spouse rebate (with child), despite its abolition by the
A New Tax System (Family Assistance) (Consequential and Related Measures) Act (No. 1) 1999
, for the purpose of working out the rebate amount under this section.

S 23AB(7) amended by No 71 of 2012, s 3 and Sch 4 items 1 and 2, by substituting
"
in respect of a dependant who is an invalid relative for the purposes of class 5 in the table in subsection 159J(2) or a dependant included in class 6 in the table in subsection 159J(2)
"
for
"
in respect of a dependant included in class 5 or 6 in the table in subsection 159J(2)
"
in para (a)(ii)(B) and
"
subsection 159J(2) or an invalid spouse or carer spouse for the purposes of class 5 in the table in subsection 159J(2)
"
for
"
subsection 159J(2)
"
in para (a)(iii), applicable to assessments for the 2011-12 income year and later income years.

S 23AB(7) amended by No 62 of 2011, s 3 and Sch 4 items 1 and 2, by substituting para (a)(ii)(D) and inserting para (a)(iii), applicable to assessments for the 2011-12 income year and later income years. Para (a)(ii)(D) formerly read:

(D)
any rebate to which the taxpayer would be entitled under section
159J
in respect of a dependant included in class 1 in the table in subsection
159J(2)
(ignoring section
159JA
) if subsection
159J(1B)
also included a reference to any dependant included in class 1 of that table and the amount applicable to class 1 of that table were $2,440; and

S 23AB(7) amended by No 41 of 2011, s 3 and Sch 5 items 58 and 59, by inserting
"
. The amount of the rebate is
"
and inserting
"
and
"
at the end of para (a), effective 27 June 2011.

S 23AB(7) amended by
No 75 of 2007
, s 3 and Sch 1 item 1, by substituting all the words after
"
159J(2)
"
, applicable to assessments for the 2007-2008 year of income and later years of income. The words formerly read:

if the amendments made by Division 5 of Part 2 of
Taxation Laws Amendment Act (No. 3) 1994
had not been made and subsections 159J(1AA), (3AA) and (3AB) had not been enacted

S 23AB(7) amended by No 45 of 2000, No 82 of 1999, No 138 of 1994, No 18 of 1993, No 224 of 1992, No 124 of 1984, No 29 of 1982, No 108 of 1981 and No 56 of 1976 and substituted by No 117 of 1975.

For the purposes of subsection (7), but subject to subsection (8A), the total period of United Nations service of a taxpayer in any year of income shall be deemed to include any period in that year of income during which the taxpayer has resided, or has actually been, in the prescribed area.

Where a rebate is allowable under subsection (7) in the assessment of a taxpayer in respect of income of a year of income and, but for this subsection, a rebate of a lesser amount would be allowable in that assessment under section
79A
, a rebate under section
79A
is not allowable in that assessment.

Where a rebate is allowable under section
79A
in the assessment of a taxpayer in respect of income of a year of income and, but for this subsection, a rebate of the same or a lesser amount would be allowable in that assessment under subsection (7), a rebate under subsection (7) is not allowable in that assessment.

Subsection 79B(4) shall be disregarded in determining for the purposes of subsections (9) and (9A) of this section the amount of a rebate allowable to a taxpayer under subsection (7) of this section or under section
79A
.

(a)
the trustee of the estate of a deceased person who has performed United Nations service is liable to pay income tax, in respect of a year of income, upon income that consists of or includes salary, wages or allowances derived by the deceased person in respect of that service; or

(b)
the death of the person resulted from an occurrence that happened during that service; and

(c)
if the person had, at the time of the happening of the occurrence, been a member of the Defence Force rendering continuous full-time service outside Australia while the taxpayer was allotted for duty in an operational area described in item 4, 5, 6, 7 or 8 of Column 1 of Schedule 2 to the
Veterans
'
Entitlements Act 1986
, the Commonwealth would be liable to pay a pension under that Act in respect of the death of the person;

the trustee is, by force of this subsection, released from the payment of so much of that tax as remains after deducting any tax deductions unapplied:

(d)
if the assessable income of the deceased person of the year of income consists solely of the salary, wages or allowances derived in respect of that service
-
from the amount of income tax so payable by the trustee; or

(e)
if the assessable income of the deceased person of the year of income includes income other than the salary, wages or allowances derived in respect of that service:

(i)
from the amount of income tax so payable by the trustee; or

(ii)
from the amount by which the income tax payable in respect of the income of the year of income has been increased by the inclusion of the salary, wages or allowances so derived in the assessable income of the deceased person of the year of income;

Nothing in subsection (10) shall be construed as authorizing or requiring the Commissioner to refund any amount paid as or for income tax by or on behalf of the deceased person or the trustee of his or her estate.

SECTION 23AC EXEMPTION OF PAY AND ALLOWANCES OF MEMBERS OF DEFENCE FORCE SERVING IN OPERATIONAL AREAS
23AC(1)
Pay and allowances earned by a person as a member of the Defence Force are exempt from income tax where:

(a)
the pay and allowances are earned during a period of operational service of the person; and

(b)
the person served in an operational area during the whole or a part of that period.

S 23AC(1) amended by No 216 of 1991 and substituted by No 135 of 1990.

23AC(2)
Subject to this section, the operational service of a member of the Defence Force, for the purposes of this section, is the member
'
s service where all of the following conditions are satisfied:

(a)
the member
'
s service was while:

(i)
a member of, or attached to, a body, contingent or detachment of the Naval, Military or Air Forces of the Commonwealth at a time when it was allotted for duty in an operational area; or

(ii)
a member of the Naval, Military or Air Forces of the Commonwealth allotted for duty in an operational area; or

(iii)
a member of the Naval, Military or Air Forces of the Commonwealth attached to a particular part of the armed forces of the United Kingdom or of the United States of America at a time when that part was allotted, by the appropriate authority of the country concerned, for duty in an operational area;

(b)
if the operational area is covered by subsection (6) and:

(i)
subparagraph (a)(i) or (ii) applies; or

(ii)
subparagraph (a)(iii) applies and the member was not serving in an operational area on 2 August 1990;

there is in force a certificate in writing issued by the Chief of the Defence Force to the effect that the allotment concerned was in response to Iraq
'
s invasion of Kuwait;

(c)
if the operational area is covered by subsection (6) and paragraph (b) does not apply
-
the member was serving in the operational area on 2 August 1990;

(ca)
if the operational area is covered by subsection (6A)
-
there is in force a certificate in writing issued by the Chief of the Defence Force to the effect that the allotment concerned was in response to Iraq
'
s invasion of Kuwait;

(cb)
if the operational area is Cambodia
-
there is in force a certificate in writing issued by the Chief of the Defence Force to the effect that the allotment concerned was in respect of the member
'
s service as part of:

(i)
the group called the United Nations Advance Mission in Cambodia; or

(ii)
the group called the United Nations Transitional Authority in Cambodia;

(cc)
if the operational area is the former Yugoslavia
-
there is in force a certificate in writing issued by the Chief of the Defence Force to the effect that the allotment concerned was in respect of the member
'
s service as part of a United Nations peacekeeping force;

(cd)
if the operational area is Somalia
-
there is in force a certificate in writing issued by the Chief of the Defence Force to the effect that the allotment concerned was in respect of the member
'
s service as part of:

(i)
the operation called Operation Restore Hope; or

(ii)
the operation called the United Nations Operation in Somalia;

(d)
the member
'
s service was not as or under an attach
é
at an Australian embassy or legation.

23AC(3)
For the purposes of this section, the operational service of a member of the Defence Force allotted for duty in an operational area covered by subsection (6), (6A) or (6B):
-

(a)
is taken to have commenced:
-

(i)
if the member was in Australia at the time at which the member was allotted for duty in the operational area
-
at the time of the member's departure from the lastport of call in Australia for duty in that area;

(ii)
if the member was outside Australia at the time at which the member was allotted for duty in the operational area
-
at the time at which the member was so allotted;

(iii)
if the member was allotted for duty in the area before the time at which it became an operational area and the member was in Australia at that time
-
at the time of the member's departure from the last port of call in Australia for duty in that area; or

(iv)
if the member was allotted for duty in the area before the time at which it became an operational area and the member was outside Australia at that time
-
at that time;

(b)
is taken to have ended at the earlier of the end of the termination date (if any) applicable to the operational area and:
-

(i)
on the member's returning to Australia
-
at the time at which the member arrived at the first port of call in Australia, unless the member left Australia for further duty in an operational area within 14 days after the member's arrival in Australia; or

(ii)
where the member was allotted for duty in an area outside Australia other than an operational area
-
at the time at which the member arrived in that area, or, if the member was in that area at the time at which the member was so allotted, at that time; and

(c)
is taken to include a period of hospital treatment consequent upon an illness contracted or injuries sustained during the person
'
s operational service.

Definition of
operational area
amended by No 18 of 1993, No 80 of 1992, No 216 of 1991.

portincludes airport.

termination datemeans:

(a)
in relation to an operational area covered by subsection (6) or (6A)
-
9 June 1991; or

(b)
in relation to an operational area covered by subsection (6B), (6C) or (6D)
-
the date prescribed by regulations (which may be a date before the commencement of the regulations) for the purposes of this definition as the termination date in respect of the operational area covered by that subsection.

The pay and allowances earned by a person serving as a member of the Defence Force are exempt from tax if:

(a)
they are earned while there is in force a certificate in writing issued by the Chief of the Defence Force to the effect that the person is on eligible duty with a specified organisation in a specified area outside Australia; and

(b)
the eligible duty is not as, or under, an attache at an Australian embassy or legation.
Eligible duty

The regulations may declare that duty with a specified organisation, in a specified area outside Australia and after a specified day, is eligible duty for the purposes of this section.
Where paragraph (1)(a) certificate in force

23AD(3)
A certificate under paragraph (1)(a):

(a)
comes into force at the later of:

(i)
the time specified in the certificate (which may be before the time when it is issued, but not before the end of the specified day under the regulations); and

(ii)
the time when the person arrives for duty in the specified area concerned; and

Former s 23AD repealed by No 100 of 1991 and inserted by No 165 of 1973.

Archived:

S 23ADA and 23AE repealed as inoperative by
No 101 of 2006
, s 3 and Sch 1 items 44 and 45, effective 14 September 2006. For
application and savings provisions
and for former wording see the
CCH Australian Income Tax Legislation archive
.

SECTION 23AF
EXEMPTION OF CERTAIN INCOME DERIVED IN RESPECT OF APPROVED OVERSEAS PROJECTS

Where a taxpayer, being a natural person, has been engaged on qualifying service on a particular approved project for a continuous period of not less than 91 days, any eligible foreign remuneration derived by the person that is attributable to that qualifying service is exempt from tax.

23AF(3)
Subject to subsections (4) and (5), a person shall be taken for the purposes of this section to be engaged on qualifying service on an approved project during any period during which:

(a)
the person is outside Australia and is engaged in the performance of personal services in connection with the approved project;

(b)
the person is travelling between Australia and the site of the approved project;

(c)
by reason of an incapacity for work due to accident or illness occurring while the person was, by virtue of paragraph (a) or (b), to be taken to be engaged on qualifying service on the approved project, the person is absent from work; or

(d)
the person is on eligible leave, being leave that accrued in respect of a period during which the person was, by virtue of any of the preceding paragraphs, to be taken to be engaged on qualifying service on the approved project.

A person shall not be taken to have been engaged on qualifying service on a particular approved project while the person was travelling between Australia and the site of the approved project unless the Commissioner is satisfied that the time taken for the journey is reasonable.

A person shall not be taken to have been engaged on qualifying service on a particular approved project by virtue of paragraph (3)(c) during a period of incapacity for work unless the person is taken to have been engaged on qualifying service on that approved project by virtue of paragraph (3)(a), (b) or (d) during a period that commenced immediately after the incapacity ceased.

(a)
a person was engaged on qualifying service on a particular approved project; and

(b)
due to unforeseen circumstances, the person ceased to be engaged on qualifying service on that approved project,

the period during which the person is to be taken to have been engaged on qualifying service on that approved project shall, except for the purpose of determining whether income derived by the person is eligible foreign remuneration, be taken to include the additional period after the person ceased to be engaged on qualifying service on that approved project during which the person would, in the opinion of the Commissioner, have continued to be engaged on qualifying service on that approved project but for those unforeseen circumstances.

23AF(7)
Where:

(a)
a person (in this subsection referred to as the
original person
) was engaged on qualifying service on a particular approved project;

(b)
due to unforeseen circumstances, the original person ceased to be engaged on qualifying service on that approved project; and

(c)
as soon as practicable after the time when the original person ceased to be engaged on qualifying service on that approved project, another person (in this subsection referred to as the
substituted person
) commenced to be engaged on qualifying service on that approved project in lieu of the original person;

the period during which the substituted person is to be taken to have been engaged on qualifying service on that approved project shall, except for the purpose of determining whether income derived by the substituted person is eligible foreign remuneration, be taken to include a period that ended immediately before the substituted person commenced to be engaged on qualifying service on that approved project in lieu of the original person and was of the same duration as the continuous period during which the original person was, immediately before the original person ceased to be engaged on qualifying service on that approved project, taken to have been engaged on qualifying service on that approved project.

23AF(8)
Where:

(a)
during the period (in this subsection referred to as the
total project period
) commencing at the time when a person was first engaged on qualifying service on an approved project and ending at the time when the person was last engaged on qualifying service on that approved project, the person was in Australia during a period or periods (in this subsection referred to as the
intervening period or intervening periods
) during which the person was not engaged on qualifying service on that approved project;

(b)
the total number of days in the intervening period or intervening periods does not exceed one-sixth of the total number of days during the total project period during which the person was engaged on qualifying service on the approved project; and

(c)
at all times during the total project period, the person was engaged on qualifying service on the approved project or was in Australia;

the periods during the total project period during which the person was engaged on qualifying service on the approved project shall together be taken to constitute a continuous period during which the person was engaged on qualifying service on the approved project.

23AF(9)
Where, immediately before a person commences to take eligible leave, leave of the same kind as the eligible leave has accrued in relation to the person but has not been used and that unused leave consists of:

(a)
leave that accrued in respect of a period or periods when the person was engaged on qualifying service on an approved project and leave that accrued in respect of a period or periods when the person was not engaged on qualifying service on an approved project;

(b)
leave that accrued in respect of 2 or more periods when the person was engaged on qualifying service on 2 or more different approved projects; or

(c)
leave that accrued in respect of 2 or more periods when the person was engaged on qualifying service on 2 or more different approved projects and leave that accrued in respect of a period or periods when the person was not engaged on qualifying service on an approved project;

the following provisions apply for the purposes of determining the extent to which the eligible leave taken by the person was eligible leave that accrued in respect of a period when the person was engaged on qualifying service on a particular approved project:

(d)
in a case to which paragraph (a) applies
-
the person shall be deemed first to have taken leave that accrued in respect of the period when the person was engaged on qualifying service on the approved project referred to in that paragraph;

(e)
in a case to which paragraph (b) applies
-
the leave shall be deemed to have been taken in the order that is reverse to the order in which it accrued;

(f)
in a case to which paragraph (c) applies
-

(i)
the person shall be deemed not to have taken any of the leave that accrued in respect of a period or periods when the person was not engaged on qualifying service on an approved project until the person had taken leave for a number of days equal to the number of days of leave referred to in that paragraph that had accrued in respect of periods when the person was engaged on qualifying service on approved projects; and

(ii)
the leave that had accrued in respect of periods when the person was engaged in qualifying service on approved projects shall be deemed to have been taken by the person in the order that is reverse to the order in which that leave accrued.

23AF(10)
Where the amount of income derived by a person that:

(a)
is attributable to qualifying service on an approved project; and

(b)
would, apart from this subsection, be eligible foreign remuneration;

exceeds the amount of income that the Commissioner considers would be reasonable remuneration in respect of that qualifying service, the amount of the excess is not eligible foreign remuneration for the purposes of this section.

Where the Trade Minister is satisfied that the undertaking of an eligible project that was commenced, or is proposed to be commenced, after 19 August 1980 is, or will be, in the national interest, that Minister may, by writing signed by that Minister, approve that eligible project for the purposes of this section.

(a)
a person has derived eligible foreign remuneration during a year of income; and

(b)
at the time of making an assessment in respect of income of the person of the year of income, the Commissioner is of the opinion that, at a later time, circumstances will exist by reason of which that eligible foreign remuneration will be exempt from tax by virtue of this section;

23AF(16)
Where, in the making of an assessment, this section has been applied on the basis that a circumstance that did not exist at the time of making the assessment would exist at a later time and the Commissioner, after making the assessment, becomes satisfied that that circumstance will not exist, then, notwithstanding anything contained in section
170
, the Commissioner may amend the assessment at any time for the purposes of ensuring that this section shall be taken always to have applied on the basis that that circumstance did not exist.

23AF(17)
For the purposes of this section, income is excluded income if:

(b)
the income is derived from sources in a country other than Australia and:

(i)
is exempt from income tax in that country; and

(ii)
would not be exempt from income tax in that country apart from the operation of an agreement applying to Australia and that other country relating to the avoidance of double taxation or of a law of that other country giving effect to such an agreement; or

S 23AF(17) amended by No 15 of 2007, s 3 and Sch 1 item 42, by substituting para (aa)(i), (ii), (iii) and (iv) for para (aa)(i) and (ii), applicable to the 2007-2008 income year and later years. Para (aa)(i) and (ii) formerly read:

(i)
is included in assessable income under Subdivision
AA
of Division
2
; or

(ii)
is excluded from the definition of
eligible termination payment
in subsection
27A(1)
because of paragraph (ja), (k), (ka), (m), (ma), (n) or (p) of that definition; or

S 23AF(17) amended by No 39 of 1996, No 181 of 1994, No 51 of 1986 and No 108 of 1981.

If the income of a taxpayer of a year of income consists of an amount that is exempt from tax under this section (in this section called the
exempt amount
) and other income, the amount of tax (if any) payable in respect of the other income is calculated using the formula:

Notional gross tax
Notional gross taxable income

×
Other taxable income

where:

Notional gross tax
means the number of whole dollars in the amount of income tax that would be assessed under this Act in respect of the taxpayer
'
s taxable income of the year of income if:

(a)
the exempt amount were not exempt income; and

(aa)
if the exempt amount is a payment covered by section
83-240
or
305-65
of the
Income Tax Assessment Act 1997
-
the exempt amount (excluding any part of that amount that represented contributions made by the taxpayer) were assessable income of the taxpayer; and

Notional gross taxable income
means the number of whole dollars in the amount that would have been the taxpayer
'
s taxable income of the year of income if the exempt amount were not exempt income.

Other taxable income
means the amount (if any)remaining after deducting from so much of the other income as is assessable income:

(d)
any deductions allowable to the taxpayer in relation to the year of income that relate exclusively to that assessable income; and

(e)
so much of any other deductions (other than apportionable deductions) allowable to the taxpayer in relation to the year of income as, in the opinion of the Commissioner, may appropriately be related to that assessable income; and

S 23AF(17A) (definition of
"
notional gross tax
"
) amended by No 15 of 2007, s 3 and Sch 1 item 43, by substituting
"
a payment covered by section 83-240 or 305-65 of the
Income Tax Assessment Act 1997
"
for
"
an exempt resident foreign termination payment (within the meaning of Subdivision AA of Division 2)
"
in para (aa), applicable to the 2007-2008 income year and later years.

Subsection (17A) applies to a taxpayer in respect of income of a year of income as if any payment covered by section
83-240
or
305-65
of the
Income Tax Assessment Act 1997
in relation to qualifying service that was made in respect of the taxpayer during that year of income were income of the taxpayer of that year of income that is exempt from tax under this section.

S 23AF(17C) amended by No 15 of 2007, s 3 and Sch 1 item 44, by substituting
"
any payment covered by section 83-240 or 305-65 of the
Income Tax Assessment Act 1997
in relation to qualifying service
"
for
"
any exempt resident foreign termination payment (within the meaning of Subdivision AA of Division 2) that related to the termination of qualifying service (within the meaning of that Division
"
, applicable to the 2007-2008 income year and later years.

approved projectmeans a project in respect of which there is in force an approval granted under subsection (11).

eligible contractormeans:

(a)
a resident of Australia;

(b)
the Commonwealth, a State, a Territory, the government of a country other than Australia or an authority of the Commonwealth, of a State, of a Territory or of the government of a country other than Australia;

(c)
an organization:

(i)
of which Australia and a country or countries other than Australia are members; or

(ii)
that is constituted by a person or persons representing Australia and a person or persons representing a country or countries other than Australia; or

(d)
an agency of an organization to which paragraph (c) applies.

eligible foreign remuneration
,in relation to a person, means income (not being excluded income) that is derived by the person at a time when the person is a resident, being:

(a)
income consisting of salary, wages, commission, bonuses or allowances, or of amounts included in a person
'
s assessable income under Division
83A
of the
Income Tax Assessment Act 1997
(about employee share schemes), derived by the person in his or her capacity as an employee of an eligible contractor; or

(b)
income, or amounts included in a person
'
s assessable income under that Division, derived by the person under a contract with an eligible contractor, being a contract that is wholly or substantially for the personal services of the person;

that is directly attributable to qualifying service by the person on an approved project and includes any payments received in lieu of eligible leave that accrued in respect of a period during which the person was a resident and was engaged on qualifying service on an approved project.

Definition of
"
eligible foreign remuneration
"
amended by No 64 of 2005. No 64 of 2005, s 3 and Sch 4 item 38, contains the following application provision:

38 Application
-
amendments of the
Income Tax Assessment Act 1936(1)
The amendments apply in relation to shares or rights that a person acquires, or has acquired, under an employee share scheme only in accordance with subitem (2) or (3).
(2)
The amendments apply, on and from the time of the acquisition, if the person acquired the shares or rights on or after 26 June 2005.
(3)
If:

(a)
immediately before that day, the person was not an employee in respect of employment that affects the acquisition or holding of the share or right; and

(b)
the person becomes an employee in respect of that employment on or after that day; and

(c)
at the time of becoming an employee in respect of that employment, the person holds shares or rights that the person acquired under an employee share scheme; and

(d)
this subitem has not previously applied in relation to the person;

the amendments apply, on and from the time when the person becomes an employee in respect of that employment, to any shares or rights the person holds that the person acquired under an employee share scheme (whether or not the shares or rights were acquired before, on or after that day).

(4)
Subitem (3) does not limit the operation of subitem (2).
(5)
Expressions used in this item have the same meaning as they have for the purposes of Division
13A
of Part
III
of the
Income Tax Assessment Act 1936
. However, paragraph
139GA(1)(b)
of that Act does not apply in relation to subitem (3).

eligible leavemeans leave other than long service leave.

eligible projectmeans:

(a)
a project for the design, supply or installation of any equipment or facilities; or

(b)
a project for the construction of works; or

(c)
a project for the development of an urban area or a regional area; or

(d)
a project for the development of agriculture; or

(e)
a project consisting of giving advice or assistance relating to the management or administration of a government department or of a public utility; or

(f)
a project included in a class of projects approved in writing for the purposes of this section by the Trade Minister.

Definition of
"
eligible project
"
amended by No 88 of 2009, s 3 and Sch 5 items 72 and 73, by inserting
"
or
"
at the end of paras (a) to (d) and substituting
"
Trade Minister
"
for
"
Minister for Trade
"
in para (f), effective 18 September 2009.

Definition of
"
eligible project
"
amended by No 123 of 1984.

employeeincludes:

(a)
a person employed by the Commonwealth, by a State, by a Territory, by the government of a country other than Australia or by an authority of the Commonwealth, of a State, of a Territory or of the government of a country other than Australia; and

(b)
a member of the Defence Force.

long service leavemeans long leave, furlough, extended leave or leave of a similar kind (however described).

Where a resident, being a natural person, has been engaged in foreign service for a continuous period of not less than 91 days, any foreign earnings derived by the person from that foreign service are exempt from tax.

S 23AG(1) amended by No 14 of 2009, s 3 and Sch 4 item 7, by substituting
"
are exempt from tax
"
for
"
is exempt from tax
"
, effective 26 March 2009.

S 23AG(1) amended by No 100 of 1991.

23AG(1AA)
However, those foreign earnings are not exempt from tax under this section unless the continuous period of foreign service is directly attributable to any of the following:

(a)
the delivery of Australian official development assistance by the person
'
s employer (except if that employer is an Australian government agency (within the meaning of the
Income Tax Assessment Act 1997
));

(c)
the activities of the person
'
s employer, if the employer is exempt from income tax because of paragraph
50-50(1)(c)
or
(d)
of the
Income Tax Assessment Act 1997
(prescribed institutions located or pursuing objectives outside Australia);

S 23AG(1AA) amended by No 135 of 2015, s 3 and Sch 2 item 1, by inserting
"
(except if that employer is an Australian government agency (within the meaning of the
Income Tax Assessment Act 1997
))
"
in para (a), applicable to the 2016-17 year of income and later years of income.

S 23AG(1AA) amended by No 124 of 2013, s 3 and Sch 11 item 33, by substituting
"
50-50(1)(c)
"
for
"
50-50(c)
"
in para (c), applicable in relation to income years starting on or after 30 June 2013.

(b)
the activities of the person
'
s employer in operating a public fund covered by item 9.1.1 or 9.1.2 of the table in subsection 30-80(1) of the
Income Tax Assessment Act 1997
(international affairs deductible gift recipients);

Application
(1)
The amendment applies to foreign earnings derived on or after 1 July 2009 from foreign service performed on or after 1 July 2009.
(2)
Subitem (3) applies to:

(a)
foreign earnings derived before 1 July 2009 from foreign service performed before, on or after 1 July 2009; and

(b)
foreign earnings derived on or after 1 July 2009 from foreign service performed before 1 July 2009.
(3)
Disregard the amendment made by this Schedule in determining whether the foreign earnings are exempt from tax under subsection
23AG(1)
of the
Income Tax Assessment Act 1936
.

An amount of foreign earnings derived in a foreign country is not exempt from tax under this section if the amount is exempt from income tax in the foreign country only because of any of the following:

(a)
a law of the foreign country giving effect to a double tax agreement;

(b)
a double tax agreement;

(c)
provisions of a law of the foreign country under which income covered by any of the following categories is generally exempt from income tax:

(i)
income derived in the capacity of an employee;

(ii)
income from personal services;

(iii)
similar income;

(d)
the law of the foreign country does not provide for the imposition of income tax on one or more of the categories of income mentioned in paragraph (c);

(e)
a law of the foreign country corresponding to the
International Organisations (Privileges and Immunities) Act 1963
or to the regulations under that Act;

(f)
an international agreement to which Australia is a party and that deals with:

(i)
diplomatic or consular privileges and immunities; or

(ii)
privileges and immunities in relation to persons connected with international organisations;

(g)
a law of the foreign country giving effect to an agreement covered by paragraph (f).

If the income of a taxpayer of a year of income consists of an amount that is exempt from tax under this section (in this section called the
exempt amount
) and other income, the amount of tax (if any) payable in respect of the other income is calculated using the formula:

Notional gross tax
Notional gross
taxable income

×
Other taxable income

where:

Notional gross tax
means the number of whole dollars in the amount of income tax that would be assessed under this Act in respect of the taxpayer
'
s taxable income of the year of income if:

(a)
the exempt amount were not exempt income; and

(aa)
if the exempt amount is a payment covered by section
83-240
or
305-65
of the
Income Tax Assessment Act 1997
-
the exempt amount (excluding any part of that amount that represented contributions made by the taxpayer) were assessable income of the taxpayer; and

(b)
the taxpayer were not entitled to any rebate of tax.

Notional gross taxable income
means the number of whole dollars in the amount that would have been the taxpayer
'
s taxable income of the year of income if the exempt amount were not exempt income.

Other taxable income
means the amount (if any) remaining after deducting from so much of the other income as is assessable income:

(d)
any deductions allowable to the taxpayer in relation to the year of income that relate exclusively to that assessable income; and

(e)
so much of any other deductions (other than apportionable deductions) allowable to the taxpayer in relation to the year of income as, in the opinion of the Commissioner, may appropriately be related to that assessable income; and

S 23AG(3) (definition of
"
notional gross tax
"
) amended by No 15 of 2007, s 3 and Sch 1 item 45, by substituting
"
a payment covered by section 83-240 or 305-65 of the
Income Tax Assessment Act 1997
"
for
"
an exempt resident foreign termination payment (within the meaning of Subdivision AA of Division 2)
"
in para (aa), applicable to the 2007-2008 income year and later years.

Subsection (3) applies to a taxpayer in respect of income of a year of income as if any payment covered by section
83-240
or
305-65
of the
Income Tax Assessment Act 1997
that related to the termination of employment that was made in respect of the taxpayer during that year of income were income of the taxpayer of that year of income that is exempt from tax under this section.

S 23AG(5) amended by No 15 of 2007, s 3 and Sch 1 item 46, by substituting
"
any payment covered by section 83-240 or 305-65 of the
Income Tax Assessment Act 1997
"
for
"
any exempt resident foreign termination payment (within the meaning of Subdivision AA of Division 2)
"
, applicable to the 2007-2008 income year and later years.

S 23AG(5) inserted by No 181 of 1994.

S 23AG(2), (3) and (4) substituted for s 23AG(2), (3), (4) and (5) by No 100 of 1991.

23AG(6)
For the purposes of this section, a period during which a person is engaged in foreign service includes any period during which the person is, in accordance with the terms and conditions of that service:

(a)
absent on recreation leave, other than:

(i)
leave wholly or partly attributable to a period of service or employment other than that foreign service;

(ii)
long service leave, furlough, extended leave or leave of a similar kind (however described); or

2 or more periods in which a person has been engaged in foreign service are together taken to constitute a continuous period of foreign service until:

(a)
the end of the last of the 2 or more periods; or

(b)
a time (if any), since the start of the first of the 2 or more periods, when the person
'
s total period of absence exceeds
1/6
of the person
'
s total period of foreign service;

whichever happens sooner.

Example:

Kate is engaged in foreign service for 20 days, is absent for 2 days and is then engaged in foreign service for 10 days. These 2 periods of foreign service constitute a continuous period of foreign service, because the total period of absence is never more than 1/10 of the total period of foreign service.

Kate is then absent for 5 days before commencing a further period of foreign service. No matter how long the further period lasts, it can never constitute a continuous period of foreign service with the first 2 periods of foreign service, because on the fourth day of the second absence the total period of absence is
1/5
of the total period of foreign service.

total period of absence, in relation to a particular time,means the number of days, in the period starting at the start of the first of the 2 or more periods and ending at that time, for which the person was not engaged in foreign service.

total period of foreign service, in relation to a particular time, means the number of days, in the period starting at the start of the first of the 2 or more periods and ending at that time, for which the person was engaged in foreign service.

S 23AG(6A) and (6B) substituted for s 23AG(6A) to (6E) by No 162 of 2005, s 3 and Sch 1 item 3, applicable in relation to foreign service performed on or after 19 December 2005. For further application provisions see note under s 23AG(6A).

(a)
a person has derived foreign earnings during a year of income; and

(b)
at the time of making an assessment in respect of income of the person of the year of income, the Commissioner is of the opinion that, at a later time, circumstances will exist because of which those foreign earnings will be exempted from tax by this section;

(a)
in the making of an assessment, this section has been applied on the basis that a circumstance that did not exist at the time of making the assessment would exist at a later time; and

(b)
the Commissioner, after making the assessment, becomes satisfied that the circumstance will not exist;

then, notwithstanding anything contained in section 170, the Commissioner may amend the assessment at any time for the purposes of ensuring that this section shall be taken always to have applied on the basis that the circumstance did not exist.

Definition of
"
double tax agreement
"
amended by No 10 of 2003 and inserted by No 100 of 1991.

employeeincludes:

(a)
a person employed by a government or an authority of a government or by an international organisation; or

(b)
a member of a disciplined force.

foreign earningsmeans income consisting of earnings, salary, wages, commission, bonuses or allowances, or of amounts included in a person
'
s assessable income under Division
83A
of the
Income Tax Assessment Act 1997
(about employee share schemes), but does not include any payment, consideration or amount that:

(a)
is included in assessable income under Division
82
or Subdivision
83-295
or Division
301
,
302
,
304
or
305
of the
Income Tax Assessment Act 1997
; or

(b)
is included in assessable income under Division
82
of the
Income Tax (Transitional Provisions) Act 1997
; or

(c)
is mentioned in paragraph
82-135(e)
, (f), (g), (i) or (j) of the
Income Tax Assessment Act 1997
; or

(d)
is an amount transferred to a fund, if the amount is included in the assessable income of the fund under section
295-200
of the
Income Tax Assessment Act 1997
.

Definition of
"
foreign earnings
"
amended by No 15 of 2007, s 3 and Sch 1 item 47, by substituting paras (a), (b), (c) and (d) for paras (a) and (b), applicable to the 2007-2008 income year and later years. Paras (a) and (b) formerly read:

(a)
is included in assessable income under Subdivision
AA
of Division
2
; or

(b)
is excluded from the definition of
eligible termination payment
in subsection
27A(1)
because of paragraph (ja), (k), (ka), (m), (ma), (n) or (p) of that definition.

Definition of
"
foreign earnings
"
amended by No 64 of 2005. For application provision, see note under definition of
"
eligible foreign remuneration
"
in s
23AF(18)
.

Definition of
"
foreign earnings
"
amended by No 181 of 1994.

foreign servicemeans service in a foreign country as the holder of an office or in the capacity of an employee.

income tax, in relation to a foreign country:

(a)
in all cases
-
does not include a municipal income tax; and

(b)
in the case of a federal foreign country
-
does not include a State income tax.

(a)
to ensure that active foreign branch income derived by a resident company, and capital gains made by a resident company in disposing of non-tainted assets used in deriving foreign branch income, (except income and capital gains from the operation of ships or aircraft in international traffic) are not assessable income or exempt income of the company; and

(b)
to include in the assessable income of a resident company that part of its income and capital gains derived through a branch in a foreign country that is comparable to the amounts that would be included in an attributable taxpayer's assessable income for income and capital gains derived by a CFC resident in the same foreign country; and

(c)
to get the same outcomes where one or more partnerships or trusts are interposed between a resident company and a foreign branch; and

Subject to this section, foreign income derived by a company, at a time when the company is a resident in carrying on a business, at or through a PE of the company in a listed country or unlisted country is not assessable income, and is not exempt income, of the company.

[
CCH Note:
S 23AH(2) will be amended by No 49 of 2019, s 3 and Sch 4 item 68, by substituting
"
at a time when the company is a resident, in carrying on a business
"
for
"
at a time when the company is a resident in carrying on a business,
"
, effective 1 July 2019.]

S 23AH(3) amended by
No 168 of 2006
, s 3 and Sch 4 item 16, by substituting
"
is not taxable Australian property
"
for
"
does not have the necessary connection with Australia
"
in para (c), applicable to CGT events that happen on or after 12 December 2006.

This section applies to foreign income derived by an entity in the course of disposing, in whole or in part, of a business carried on in a listed country or unlisted country at or through a PE of the entity in the listed country or unlisted country as if the foreign income had been derived in carrying on that business.
Interposed partnerships or trusts

This section applies to any indirect interest (through one or more partnerships or trust estates) of a company in foreign income derived by a partnership or trustee through a PE of the partnership or trustee in a listed country or unlisted country as if that indirect interest were foreign income derived by the company through a PE of the company in that country.

23AH(11)
This section applies to any indirect interest (through one or more partnerships or trust estates) of a company in a capital gain or capital loss made in relation to an asset of a partnership, or made by a trustee, in carrying on a business at or through a PE of the partnership or trustee in a listed country or unlisted country as if that indirect interest were a capital gain or capital loss made by the company through a PE of the company in that country.
Active income test

23AH(13)
For the purposes of this section, the
adjusted tainted income
of a PE of an entity is income or other amounts that would be adjusted tainted income of the entity for the purposes of Part
X
if:

(a)
the assumptions in subsection (14) were made; and

(b)
subsection
446(2)
and paragraphs
447(1)(b)
, (d) and (f) had not been enacted.
Assumptions for subsections (12) and (13)

23AH(14)
The assumptions referred to in paragraphs (12)(a) and (13)(a) are:

(a)
except in applying paragraphs
447(1)(a)
, (c) and (e) and
450(6)(c)
,
(7)(d)
and
(8)(b)
, the only income or other amounts derived by the entity were the income derived in carrying on business at or through the PE; and

(b)
the entity's statutory accounting periods were the same as the entity's years of income; and

(i)
the part of the entity's operations that consists of the business carried on at or through the PE were a company (the
PE company
); and

(ii)
the remaining part of the entity's operations were a separate company (the
HQ company
); and

(iii)
the PE company and the HQ company had carried out the transactions that they would have carried out if the PE company were engaged in the same or similar activities as the PE under the same or similar conditions as the PE and were dealing wholly independently with the HQ company; and

(iv)
any income derived by the HQ company were disregarded; and

(d)
if the entity is an AFI entity (within the meaning of subsection
326(2)
)
-
the entity were an AFI subsidiary; and

(e)
in applying paragraphs
447(1)(a)
, (c) and (e), the HQ company were an associate of the PE company.

For the purposes of this section,
PE
, when it is used in Division
832
of the
Income Tax Assessment Act 1997
, does not have the meaning it has in that Act but instead has the same meaning as in this section.

S 23AH amended by No 84 of 2018, No 84 of 2016, No 168 of 2006, No 63 of 2005, No 41 of 2005; substituted by No 96 of 2004; amended by No 66 of 2003, No 77 of 2001, No 46 of 1998, No 155 of 1997, No 121 of 1997, No 80 of 1992 and No 48 of 1991 and inserted by No 5 of 1991.

(d)
if the payment is of a kind referred to in paragraph
365(1)(b)
and, apart from this section, an amount would be included in the taxpayer's assessable income under section
92
in respect of an individual interest in the net income of the partnership of the year of income referred to in that paragraph
-
that amount is not assessable income, and is not exempt income, to the extent of the debit;

(e)
if the payment is of a kind referred to in paragraph
365(1)(c)
and, apart from this section, an amount would be included in the taxpayer's assessable income under section
97
,
98A
or
100
in respect of a share of the net income of the trust of the year of income referred to in that paragraph
-
that amount is not assessable income and is not exempt income, to the extent of the debit;

(ea)
if the payment is of a kind referred to in paragraph
365(1)(c)
and, apart from this section, an amount would be assessable to the trustee of the trust referred to in that paragraph under section
98
in respect of a share of the net income of the trust of the year of income referred to in that paragraph
-
that amount is not so assessable to the extent of the debit;

(f)
if the payment is of a kind referred to in paragraph
365(1)(d)
-
the payment is not, to the extent of the debit, assessable to the taxpayer as mentioned in that paragraph;

(g)
if the payment is of a kind referred to in paragraph
365(1)(e)
and, apart from this section, an amount would be included in the taxpayer's assessable income, of the year of income referred to in that paragraph, under section
99B
in respect of the trust property referred to in that paragraph
-
that amount is not assessable income, and is not exempt income to the extent of the debit.

S 23AI(2) substituted by
No 143 of 2007
, s 3 and Sch 1 item 29, applicable in relation to income years, statutory accounting periods and notional accounting periods starting on or after the first 1 July that occurs after 24 September 2007. For savings provisions, see note under s
559A
. S 23AI(2) formerly read:

23AI(2)
This section is to be disregarded for the purposes of applying:

(a)
the definition of
``foreign income deduction''
in sections
79D
and
160AFD
; and

(b)
any other provision of this Act to determine allowable deductions.

Former s 23AJ repealed by No 110 of 2014, s 3 and Sch 2 item 1, applicable to distributions and non-share dividends made after 16 October 2014. S 23AJ formerly read:

SECTION 23AJ CERTAIN NON-PORTFOLIO DIVIDENDS FROM FOREIGN COUNTRIES NOT ASSESSABLE
23AJ
A non-portfolio dividend (as defined in section
317
) paid to a company is not assessable income, and is not exempt income, of the company if:

(a)
the company is an Australian resident and does not receive the dividend in the capacity of a trustee; and

(b)
the company that paid the dividend is not a Part
X
Australian resident (as defined in that section).

Former s 23AJ substituted by No 96 of 2004, amended by No 66 of 2003 and inserted by No 5 of 1991.

SECTION 23AK
AMOUNTS PAID OUT OF ATTRIBUTED FOREIGN INVESTMENT FUND INCOME NOT ASSESSABLE

(i)
a FIF attribution account payment of a kind referred to in former paragraph
603(1)(a), (b), (c), (d), (f), (g) or (h)
is made to a taxpayer (other than a partnership or taxpayer in the capacity of trustee of a trust); or

(ii)
a FIF attribution account payment of a kind referred to in former paragraph
603(1)(e)
is made to a taxpayer; and

A post FIF abolition debit arises for a FIF attribution account entity (the
eligible entity
) in relation to a taxpayer if:

(a)
the eligible entity makes a FIF attribution account payment to the taxpayer or to a FIF attribution account entity; and

(b)
immediately before the eligible entity makes the FIF attribution account payment, there is a post FIF abolition surplus for the eligible entity in relation to the taxpayer.
Amount of post FIF abolition debit

23AK(5)
A post FIF abolition surplus for a FIF attribution account entity in relation to a taxpayer exists at a particular time (the
relevant time
) if the sum of:

(a)
the entity
'
s total FIF attribution credits (within the meaning of former section
605
) that arose before the commencement of Schedule 1 to the
Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010
; and

(b)
the entity
'
s total post FIF abolition credits arising before the relevant time in relation to the taxpayer;

exceeds the sum of:

(c)
the entity
'
s total FIF attribution debits (within the meaning of former section
606
) that arose before that commencement in relation to the taxpayer; and

(d)
the entity
'
s total post FIF abolition debits arising before the relevant time in relation to the taxpayer.
Post FIF abolition credit arises

23AK(6)
A post FIF abolition credit arises for a FIF attribution account entity (the
eligible entity
) in relation to a taxpayer if a FIF attribution account payment that requires a post FIF abolition debit for another entity in relation to the taxpayer is made to the eligible entity.
Amount of post FIF abolition credit

23AK(7)
The amount of the post FIF abolition credit is equal to the amount of the post FIF abolition debit for the other entity.
When the post FIF abolition credit arises

23AK(8)
The post FIF abolition credit arises when the FIF attribution account payment referred to in subsection (6) is made.
Effect of this section applying

23AK(9)
If this section applies, the following provisions have effect:

(a)
if the payment is of a kind referred to in former paragraph
603(1)(a)
or (b)
-
the payment is not assessable income, and is not exempt income, to the extent of the debit;

(b)
if the payment is of a kind referred to in former paragraph
603(1)(c)
and, apart from this section, an amount would be included in the taxpayer
'
s assessable income under section
92
in respect of an individual interest in the net income of the partnership of the year of income referred to in that paragraph
-
that amount is not assessable income, and is not exempt income, to the extent of the debit;

(c)
if the payment is of a kind referred to in former paragraph
603(1)(d)
and, apart from this section, an amount would be included in the taxpayer
'
s assessable income under section
97
,
98A
or
100
in respect of a share of the net income of the trust of the year of income referred to in that paragraph
-
that amount is not assessable income, and is not exempt income, to the extent of the debit;

(d)
if the payment is of a kind referred to in former paragraph
603(1)(d)
and, apart from this section, an amount would be assessable to the trustee of the trust referred to in that paragraph under section
98
in respect of a share of the net income of the trust of the year of income referred to in that paragraph
-
that amount is not so assessable to the extent of the debit;

(e)
if the payment is of a kind referred to in former paragraph
603(1)(e)
-
the payment is not, to the extent of the debit, assessable to the taxpayer as mentioned in that paragraph;

(f)
if the payment is of a kind referred to in former paragraph
603(1)(f)
and, apart from this section, an amount would be included in the taxpayer
'
s assessable income, of the year of income referred to in that paragraph, under section
99B
in respect of the trust property referred to in that paragraph
-
that amount is not assessable income, and is not exempt income, to the extent of the debit;

(g)
if the payment is of a kind referred to in former paragraph
603(1)(g)
-
the payment is not assessable income, and is not exempt income, to the extent of the debit;

(h)
if the payment is of a kind referred to in former paragraph
603(1)(h)
-
the payment is not assessable income, and is not exempt income, to the extent of the debit.

23AK(10)
[
Other deduction provisions]

This section is to be disregarded for the purposes of applying any other provision of this Act to determine allowable deductions.

23AK(11)
[
Interpretation]

In this section:

FIF attribution account entityhas the same meaning as in former Part
XI
.

FIF attribution account paymenthas the same meaning as in former Part
XI
.

FIF attribution account percentagehas the same meaning as in former Part
XI
.

trusthas the same meaning as in former Part
XI
, but does not include a trust covered by former subsection
605(11)
.

(i)
a FIF attribution account payment of a kind referred to in paragraph 603(1)(a), (b), (c), (d), (f), (g) or (h) is made to a taxpayer (other than a partnership or taxpayer in the capacity of trustee of a trust); or

(ii)
a FIF attribution account payment of a kind referred to in paragraph 603(1)(e) is made to a taxpayer; and

(b)
on the making of the payment, a FIF attribution debit arises, for the FIF attribution account entity making the payment, in relation to the taxpayer;

the following provisions have effect:

(c)
if the payment is of a kind referred to in paragraph 603(1)(a) or (b)
-
the payment is not assessable income, and is not exempt income, to the extent of the debit;

(d)
if the payment is of a kind referred to in paragraph 603(1)(c) and, apart from this section, an amount would be included in the taxpayer
'
s assessable income under section 92 in respect of an individual interest in the net income of the partnership of the year of income referred to in that paragraph
-
that amount is not assessable income, and is not exempt income, to the extent of the debit;

(e)
if the payment is of a kind referred to in paragraph 603(1)(d) and, apart from this section, an amount would be included in the taxpayer
'
s assessable income under section 97, 98A or 100 in respect of a share of the net income of the trust of the year of income referred to in that paragraph
-
that amount is not assessable income, and is not exempt income, to the extent of the debit;

(ea)
if the payment is of a kind referred to in paragraph 603(1)(d) and, apart from this section, an amount would be assessable to the trustee of the trust referred to in that paragraph under section 98 in respect of a share of the net income of the trust of the year of income referred to in that paragraph
-
that amount is not so assessable to the extent of the debit;

(f)
if the payment is of a kind referred to in paragraph 603(1)(e)
-
the payment is not, to the extent of the debit, assessable to the taxpayer as mentioned in that paragraph;

(g)
if the payment is of a kind referred to in paragraph 603(1)(f) and, apart from this section, an amount would be included in the taxpayer
'
s assessable income, of the year of income referred to in that paragraph, under section 99B in respect of the trust property referred to in that paragraph
-
that amount is not assessable income, and is not exempt income, to the extent of the debit;

(h)
if the payment is of a kind referred to in paragraph 603(1)(g)
-
the payment is not assessable income, and is not exempt income, to the extent of the debit;

(i)
if the payment is of a kind referred to in paragraph 603(1)(h)
-
the payment is not assessable income, and is not exempt income, to the extent of the debit.

S 23AK(2) substituted by No 143 of 2007, s 3 and Sch 1 item 30, applicable in relation to income years, statutory accounting periods and notional accounting periods starting on or after the first 1 July that occurs after 24 September 2007. For savings provisions, see note under s
559A
. S 23AK(2) formerly read:

23AK(2)
This section is to be disregarded for the purposes of applying:

(a)
the definition of
foreign income deduction
in sections 79D and 160AFD; and

(b)
any other provision of this Act to determine allowable deductions.

23AK(3)
In this section:

FIF attribution account entityhas the same meaning as in Part XI;

FIF attribution account paymenthas the same meaning as in Part XI;

FIF attribution debithas the same meaning as in Part XI;

trusthas the same meaning as in Part XI, but does not include a trust covered by subsection 605(11).

S 23AK(3) (definition of
"
trust
"
) amended by No 58 of 2006, s 3 and Sch 7 item 37, by substituting
"
605(11)
"
for
"
605(9)
"
, applicable to assessments for the 2001-02 income year and later income years.

S 23AK inserted by No 190 of 1992.

Archived:

S 23AL repealed as inoperative by No 101 of 2006, s 3 and Sch 1 item 46, effective 14 September 2006. For application and savings provisions and for former wording see the CCH Australian Income Tax Legislation archive.

Note:

A remade version of section 23AL is included in the
Income Tax Assessment Act 1997
by item 748 of Schedule 2 to this Act.

FORMER SECTION 23A
23A
PARTIAL EXEMPTION OF INCOME FROM CERTAIN MINING OPERATIONS
(Repealed by No 126 of 1974)

(a)
it is necessary, for the purposes of applying a provision of this Act in the assessment of a taxpayer for a year of income, to take into account:

(i)
the amount of consideration received, entitled to be received or taken to have been received, by the taxpayer in respect of the disposal of an asset; or

(ii)
the capital proceeds from a CGT event happening in relation to a CGT asset;

being an asset that is an interest in a FIF attribution account entity; and

(b)
immediately before the disposal or CGT event takes place there is a post FIF abolition surplus for the FIF attribution account entity in relation to the taxpayer;

then, for the purposes of this Act:

(c)
the consideration or capital proceeds that, apart from this section, would be taken into account under the provision referred to in paragraph (a) in respect of the disposal or CGT event is taken to be reduced by so much of the amount of the post FIF abolition surplus as does not exceed the consideration or capital proceeds; and

(d)
a post FIF abolition debit arises at the time of the disposal or the CGT event under this paragraph, in relation to the taxpayer, for the FIF attribution account entity; and

(e)
the amount of the post FIF abolition debit is equal to so much of the surplus as is taken into account under paragraph (c).

23B(2)
For the purposes of paragraph (1)(c), if the disposal of the asset or the CGT event causes the taxpayer
'
s FIF attribution account percentage for the FIF attribution account entity to be reduced by a proportion, then only that proportion of the post FIF abolition surplus for the entity is to be taken into account under that paragraph.

23B(3)
In this section:

FIF attribution account entityentity has the same meaning as in former Part
XI
.

FIF attribution account percentagehas the same meaning as in former Part
XI
.

S 23B inserted by No 114 of 2010, s 3 and Sch 1 item 7, applicable in relation to the 2010-11 year of income for a taxpayer and later years of income.

Former s 23B repealed by No 101 of 1956.

Archived:

S 23C and 23D repealed as inoperative by
No 101 of 2006
, s 3 and Sch 1 item 47, effective 14 September 2006. For
application and savings provisions
and for former wording see the
CCH Australian Income Tax Legislation archive
.

SECTION 23E
23E
REDEMPTION OF SPECIAL BONDS REDEEMABLE AT A PREMIUM
(Repealed by No 47 of 2016)

SECTION 23E REDEMPTION OF SPECIAL BONDS REDEEMABLE AT A PREMIUM
23E(1)
An amount received by a person upon the redemption of a Special Bond, other than a part of that amount paid as accrued interest, is not assessable income and is not exempt income of the person.

S 23E(1) substituted by No 66 of 2003 and a formal amendment by No 108 of 1981.

23E(2)
Subsection (1) does not affect the operation of this Act in relation to the redemption of a Special Bond owned by a person where, if the Special Bond had been sold by that person at the time of the redemption:

(a)
the proceeds of the sale would have been included in the assessable income of that person; or

(b)
any profit arising from the sale would, disregarding section 26BB, have been included in the assessable income of that person.

credit unionmeans a company in relation to which the following conditions are satisfied:

(a)
the company is an ADI (authorised deposit-taking institution) for the purposes of the
Banking Act 1959
;

(b)
the company has a consent under section 66 of that Act that allows it to assume or use the expression
"
credit union
"
or
"
credit society
"
, or another expression (whether or not in English) that is of like import to either of those expressions.